Business First - December 6th, 1999
THP Development Co. has an option to purchase Middletown Station and the undeveloped outer parcels surrounding the Shelbyville Road shopping center, which is anchored by biggs Hypermarket.
THP’s plans for the site include modifying the façade of the mall and constructing five new retail buildings, which would require approval from the Jefferson County Planning Commission and city of Middletown.
The sale is contingent on THP receiving permission to make those changes, which would alter the official development plan approved before construction of the 77-acre Middletown Station began in 1989, said Benton Seay, senior vice president of Hagan Development Co., the leasing and marketing arm of THP.
If the new concept is adopted, the Louisville company would close on the transaction in the spring of 2000, he said.
Seay said he expected bigg’s, which had 18 years remaining on a 20-year lease, will remain at Middletown Station. And an official for bigg’s owner, Supervalu Inc. of Minnesota, said the 210,000-square-foot grocery and general merchandise store would not be affected by the sale.
“We have no plans to close the store,” said Rita Simmer, communications director at Supervalu.
Seay would not say how much THP is proposing to pay for the triangular-shaped site between Aiken, Shelbyville and English Station roads. The property includes the 312,842-square-foot building that houses bigg’s and several small retailers.
He did estimate, however, that the development firm would spend $35 million to $40 million on the project. The price includes the land, the bigg’s building, 12 outparcels, and the cost of constructing the new structures and updating the mall exterior.
Middletown Station was developed by a joint venture involving Australian and French developers, who bought the land in the late 1980s from Louisville developer William “Buck” Marshall. The property was divided three years ago between two Swiss concerns spun off from the original partnership.
The mall is owned by a group that incorporated in Louisville as Middletown Station Shelby Inc., and the outparcels belong to Middletown Property Trust.
(Middletown Property’s holdings do not include lots along Shelbyville Road that previously were sold for a Bank of Louisville branch, Bassett Furniture Store, a small strip center where Blockbuster Video is located, and such restaurant chains as Applebee’s, Wendy’s, Waffle House and Captain D’s Seafood.)
AmeriShop Real Estate Services of Dallas represent the current owners in Louisville.
John Downs, vice president of asset management at AmeriShop, said Middletown Station was put up for sale because the European companies are divesting their North American real estate portfolios.
Other companies looked at Middletown Station, Downs said, but only THP’s executives pursued a purchase. “They are the ones that stepped forward with a deal we found acceptable,” Downs said.
The original plans for Middletown Station called for constructing a mall with space for up to 45 stores in two phases, beginning with the $38 million core where bigg’s is located. A total of 418,000 square feet was to have been under roof with the completion of two wings that were never built.
THP is proposing to replace the additions with four free-standing buildings for single retail users, ranging in size from 20,000 square feet to 120,000 square feet. A 17,500 square foot office structure on the northeast corner of Middletown Station also is proposed in a revised development plan drawn up for THP by Presnell Associates Inc.
THP’s other Louisville projects have included the renovation and expansion of Shelbyville Road Plaza. The company has not formally asked the planning commission to consider the new plan, which ultimately must be accepted by the city of Middletown before changes could be made.
The new retail buildings THP is proposing would be located on the edge of the parking lot, which would be reconfigured.
Hagan Properties has been in contact with potential new tenants and buyers for the space proposed under the new concept. Possible occupants include a car dealership, movie theater, discount department store and home and garden center, Seay said.
“These are just possibilities for uses that we feel are missing from Middletown and the surrounding area,” he said.
Seay declined to disclose the identities of companies called on by THP. “You don’t want to tip your had until your deal is done,” he said, adding, “we have had significant interest form various (fast food and full-service) restaurants.”
Various tenants have moved in and out of Middletown Station since the opening of bigg’s, whose share of the Louisville grocery market is put at approximately 7 percent by Supermarket News.
Stores operating on either side of bigg’s now include Lerner New York, Payless Shoes, Merle Norman Cosmetics, Gross Diamond Center and Peak Performance Fitness Equipment. A Firstar Bank branch is located within bigg’s.
Seay said about one-quarter of the existing space is vacant.
Middletown Station’s success has been hampered by changing retail trends; the size, design and layout of the center; and the completion of Springhurst Towne Center at nearby Westport Road and the Gene Snyder Freeway, Seay said.
To compete with existing malls, Seay said, Middletown Station would have to have been approximately 2 ½ times the proposed 418,000 square feet. That was not possible, though, because of the presence of natural gas pipelines buried below the parking lot in the center of the development. Safety regulations prohibit construction of buildings over transmission lines, although paved parking is permitted.
“The commitment to the mall concept was probably its undoing,” he said. “It does not have the scale needed. Today, you need at least 1 million square feet for a mall.”
Redesigning the space for fewer stores should make Middletown Station more attractive to the “big box” users that prefer to stand alone or be in small clusters, such as at the Springhurst Towne Center power center, Seay said. “We think there is a demand for larger, regional retailers,” he said. “We want to bring a more dynamic tenant mix.”
Replacing some of the brick exterior of the mall with glass and architectural features would eliminate the “fortress-like looks” of the building and make it more appealing to consumers, he said. “We are currently looking at ways to open it up. It needs to be more inviting.”
Timing is more favorable for Middletown Station now, Seay said as he explained THP’s interest in the development.
Available space already zoned for commercial or industrial use is in short supply now in Jefferson County. And Seay said opposition by neighboring property owners to requests for rezoning can be intense, adding time and cost of a proposed project that could be denied approval by zoning authorities. “It is difficult to get land rezoned in Jefferson County.”
Construction of new apartment complexes and subdivisions along the Shelbyville Road corridor since the opening of Middletown Station means a greater customer base, Seay said. Demographic studies also indicate income levels in the area would support the retailers Hagan Properties wants to attract, he said.
Using 1998 U.S. Census Bureau projections, Seay said, 24,455 people live within a 3-mile radius of the shopping center. The average household income in the area is $101,522.
“We expect those numbers to spike in the 2000 Census. It seems people want to live out here,” he said.
Real estate analyst George Chapman of Chapman & Bell described the population and income figures for the area as encouraging for a retail development in close proximity to the Snyder Freeway.
“The Gene Snyder Freeway, we are finding, is a huge draw for shoppers. Encroachment of retail development out Shelbyville Road has been slow. There is no critical mass for shopping nearby except for Middletown Plaza,” he said. “(Middletown Station) could be very successful. How successful depends on continued growth.”